Businesses warn Russia: Don’t make it a crime to comply with U.S. sanctions

MOSCOW (Reuters) – Russian business lobby groups voiced opposition on Wednesday to a draft law that would make it a crime to comply with sanctions imposed by the United States or other countries.

The United States last month imposed sanctions on some of Russia’s biggest companies and businessmen, striking at allies of President Vladimir Putin to punish Moscow for alleged meddling in the 2016 U.S. presidential election and other “malign activities”.

In retaliation, Russian lawmakers in a first reading approved a bill making it a crime punishable by up to four years in jail to refuse to supply services or do business with a Russian citizen, citing U.S. or other sanctions.

The bill gets a second reading on Thursday.

“This bill creates risks of unreasonable criminal prosecution of Russian and foreign citizens, of restricted cooperation with foreign investors, reduction of interest in investing in Russia from foreign companies and the business climate worsening,” the Russian Union of Industrialists and Entrepreneurs said in a statement.

Forcing Russian economic entities to act in contravention of U.S. sanctions may lead to an extension of secondary sanctions to these entities, limit their ability to work in the global market and further harm Russia’s economy, it added.

The draft law has also raised concerns among some other Russian executives and groups, including the Association of European Businesses.

“We are afraid that the European businesses may be caught between the conflicting requirements of U.S. and Russian authorities in relation to sanctions,” the association said.

It is unacceptable to pass the draft law in its current form, Andrey Kostin, the head of VTB, Russia’s second biggest lender, was quoted as saying by the RIA news agency.

If it becomes law in its current form, the draft would force firms, in effect, to choose between doing business exclusively inside Russia, or having business dealings outside Russia. Many businesses rely on being able to do both.

Prime Minister Dmitry Medvedev said last month he backed the idea of making it a criminal offence to observe U.S. sanctions and said the government should support sanctions-hit Russian companies to ensure that jobs were not lost.

Alexander Zhukov, deputy speaker of the lower house of parliament, said earlier this week that the draft would undergo changes before the second reading. He did not specify though if the criminal penalties for observing sanctions would be removed as part of those changes.

In a separate joint statement, the German Committee on Eastern European Economic Relations, which represents German industry in the area, and the Russian Union of Industrialists and Entrepreneurs said Russian counter-sanctions could become a further burden on the Russian and international economy.

Germany has extensive business and energy links to Russia and some of its lobby groups have previously expressed concern about the U.S. sanctions against Moscow.